Thanks to the success
of the Anniversary campaign, the strength of Annual Giving and the
growth of our endowment, Princeton is able to take several important
steps that will enhance our financial aid programs for undergraduates
and graduate students, and strengthen our teaching and research
programs in significant ways.

At their January meeting,
the Trustees approved a major increase in endowment income spending
and targeted this boost in operating budget funds to our highest
priorities. I would like to describe briefly the initiatives we
are taking, beginning with undergraduate financial aid and instruction.
Starting with the next academic year, Princeton will:

· Remove required
loans from all future undergraduate financial aid awards and replace
them with grants, while also increasing the size of financial aid
awards for lower- and middle-income families.

· Launch a new
freshman year writing program for all undergraduates, in which all
freshmen will take specially designed small writing seminars. These
seminars will carry full academic credit and will result in increasing
by one the required number of courses for graduation.

· Strengthen academic
advising in the residential colleges, support the expanded use of
technology in teaching through the new Educational Technologies
Center, and improve teaching laboratories in the natural sciences
and engineering.

We believe that part
of Princeton's obligation to society is to attract and enroll exceptional
students from all income levels. This is possible only if our financial
aid programs truly meet students' needs. These new steps build on
other initiatives we have taken in recent years to assess more fairly
the financial capacities of students and their families, and while
loans will still be available

to students and parents
who would like to make use of them, the elimination of the required
loan from all financial aid packages means that students will have
greater flexibility in making life and career choices when they
graduate because they will not be faced with repaying those debts.
The Trustees also approved a 3.0 percent increase in student fees
for next year, the lowest since the 1960s.

In this centennial year
of the Graduate School, we were especially pleased to be able to
strengthen Princeton's leadership position in graduate education.
Specifically, we will:

· Provide fellowships
for all first-year Ph.D. students in the sciences and engineering.
This means that these students now will be able to take advanced
courses for a year before committing to a particular research project
and area of concentration. Until now support for first-year students
in the sciences and engineering came from externally-sponsored faculty
research grants. We believe that this change will have a very positive
influence on the quality of graduate education in these areas.

· Provide summer
support for all Ph.D. students in the humanities and social sciences.
Students in the humanities and social sciences will be able to make
more rapid progress toward their degrees without the interruptions
many now experience because of the need to support themselves financially
during the summer. (We have long provided academic-year fellowships
and assistantships to students in the humanities and social sciences.)

Additional funding also
has been made available to a broad range of restricted accounts
that support library acquisitions, the teaching and research mission
of the academic departments, and a variety of other educational
programs. The quality of campus life will also be improved as a
result of the spending rate increase. Additional funds have been
made available to accelerate our undergraduate dormitory renovation
program, and enhance our major maintenance budget. We are also committed
to the construction of additional graduate student housing.

In determining how this
increased spending would be allocated, we were guided both by our
highest priority needs and the need to assure sufficient flexibility
in our budget so that we can make appropriate adjustments if necessary
over time. As we analyze our budget projections, looking well into
the future, we believe that our expanded commitments to undergraduate
and graduate student aid and to our educational programs are fully
sustainable, assuming we continue to meet our basic long-term targets
for the management of the endowment and as long as we continue to
merit the support of our alumni and other donors through Annual
Giving and capital gifts.

We believe that this
increase in spending helps us achieve a critical balance between
meeting important needs of this generation of students and faculty
and sustaining Princeton's capacity to meet the needs of generations
yet to come. These steps enable us to invest both in the physical
plant that is such an important University asset and, even more
significantly, in the human and intellectual capital that lies at
the heart of the University. We are exceedingly grateful to all
alumni and other donors whose generosity over many years has made
this possible.

More information about
the spending rate increase and the steps it enables us to take is
available on line: www.princeton.edu/pr/news/01/q1/0127-overview.htm.